Thursday Roundup: The 2012 Drought

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The meat industry is saying that new rules proposed by the U.S. Department of Agriculture that would govern livestock markets would cost $1.6 billion and cause the loss of 22,843 jobs. Is that reasonable?

Two University of Tennessee ag economists look at the claims made by the National Meat Association — and find those claims wanting. But first, a little background.

The USDA proposed new rules under the Grain Inspection, Packers and Stockyards Act (GIPSA), the 1917 law that governs the relationship between meat producers and buyers. The idea of the rule was to give meat producers more power in the marketplace, which is increasingly dominated by big buyers and huge supermarket chains.

The packers responded with a study finding that the rules would cost money and jobs. Members of Congress have weighed in, and the House has already voted to withhold funds for enforcement of the new rules.

Economists Daryll Ray and Harwood Schaffer have examined the meat packers’ report (found here) and have written an analysis. They find that the claims of the Meat Institute are one-sided. They don’t take into account the costs of the current system paid for by small chicken, hog and beef producers.

Ray and Schaffer describe a system where small producers are powerless in the market. Quality is not necessarily rewarded, and producers can be run out of business as subsidies are bestowed on some farmers but not on others. In the current system, Ray and Schaffer say, producers lack any kind of power. They write:

The integrators (the packers) enjoy a monopsonistic market structure. Typically the growers, though they own the buildings, have only one integrator that will buy their chickens. The growers form what is called a captive supply and are at the mercy of the integrator.

There will be economic winners and losers if the GIPSA rules are placed into effect—that is to be expected. It’s the justification of continued use of practices that result in unequal treatment of some participants because the elimination of these practices would cause economic costs by participants who have greater economic and political power that seems illogical and counter to the purpose of rules. 

• We didn’t know about Deep Springs College, a school on a California cattle ranch. The college operates “on the belief that manual labor and political deliberation are integral parts of a comprehensive liberal arts education,” according to the college’s web site. 

Most graduates of the two year work/study program at Deep Springs go on to Ivy League colleges. 

Anyway, the point of the article is that Deep Springs has been male only since it was founded in 1917. Now it’s going co-ed.

• The Des Moines Register reports that a new poll of Iowa caucus-goers puts Mitt Romney in the lead among Republicans. 

Earlier polls had shown Texas Gov. Rick Perry in the lead. But the new American Research Group survey of 600 likely caucus voters finds Romney with 21 percent; Michele Bachmann with 15 percent; Perry with 14 percent; and Rep. Ron Paul with 12 percent. 

• There is likely to be a second year of drought on the Southern Plains, DTN reports, as it appears that La Nina will return. 

“Many of Texas’s bad droughts do coincide with multi-year La Ninas, such as in 1949 through 1951, and 1954 through 1957,” said USDA ag meteorologist Brad Rippey. “It’s not uncommon for multi-year La Ninas, and for multi-year droughts driven by La Nina.”

See the latest Drought Monitor map on the top of this page 

• West Virginia has this year’s only competitive governor’s race. Acting Gov. Earl Ray Tomblin is trying to hold on to his office. He is challenged by Republican Bill Maloney.

The Rs are running against President Obama, according to the National Journal. 

• Developers of wind energy wonder what will happen when the current tax credit for wind power expires in 2012. 

Drew Kerr at InsideClimate News reports that wind advocates have asked for a long term extension, but no action has been taken — and Senate Majority Leader Harry Reid said he was “not confident” such an extension would pass a divided Congress.

• There’s a peanut shortage, Harvest Public Media reports, and that’s causing the price of peanut butter to soar. 

 

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